Puerto Rico Now Bankrupt?: What the U.S. Congress Plans To Do

After Puerto Rico Governor, Alejandro García Padilla, admitted that the country has run out of cash because of its $70 billion debt, the US Congress has thought of some ways to remedy the situation.

CNN Money said the legislative body presented two bills that could help Puerto Rico recover from its humanitarian crisis.

The first option is to offer the country "cash, tax cuts and oversight but no legal power," while the second one has no monetary offering but gives the country the legal power for it to be able to restructure some debts.

For the first option, CNN Money said the Republican-led senate finance committee has proposed a bill that will offer Puerto Rico $3 billion in emergency cash.

"Additionally, it would provide federal oversight to ensure Puerto Rico has sustainable debt plans going forward," added the same report.

According to Mother Jones, the bill also includes a 50 percent cut in the payroll tax of Puerto Rico residents in the next five years.

"We need to make sure that Puerto Rico doesn't find itself in the same situation in the future. This comprehensive bill should help ease the current liquidity crisis while creating a path that can lead Puerto Rico back to long-term fiscal responsibility," Grassley noted.

The lawmakers also highlighted that the pension plan in the US territory should be carefully studied.

The second option was proposed by Rep. Sean Duffy in a bill that will offer no financial help to the country, but will give it "access to Chapter 9 bankruptcy," as per CNN Money.

But, it noted that there is a big catch for this one as most of Puerto Rico's debt doesn't belong to the Chapter 9 bankruptcy, but rather to the country's central government.

In a similar report, USA Today said Padilla has ruled out on Thursday the possibility of pension cuts to help the country recover from its fiscal crisis.

"There's no more tricks. This is it. We're doing everything we can to meet our (debts), but we need (bondholders) to do their part," Padilla said noting that it will be really hard for the country to pay its $1 billion debt on or before the Jan. 2 schedule of payment.

He has earlier called for Congress to construct a legal framework, which will enable those agencies buried in debt to restructure the money they owe.

The Puerto Rican governor also clarified that he is not requesting for a bailout, but noted that congressional action is very much needed to avoid a "humanitarian crisis."